CAPITAL, TRADE, NON-TRADE INCOME

Capital and income receipt: PMA test

- Capital: Receipt from disposal of PMA (retained, used to
produce income)
- Income: From disposal of circulating capital (bought and
sold- recurring)
Capital and trading income receipt: BOT test (for
disposal of asset)
(1) Subject matter of realisation (Nature and/or quantity of
the asset) - Trading: Assets with ready market and acquired
in large quantities - Capital: Assets capable of providing
personal enjoyment/pride of possession, give periodic
income or appreciation of capital value, (2) Period of
ownership, (3) Frequency of similar transactions, (4)
Supplementary work (increase saleability through
improvement or marketing), (5) Circumstances of realisation
(Reasons for disposal can indicate whether there was
intention to trade, e.g. Exigencies, previously unforeseeable
opportunities, forced sale), (6) Motive inferred, 7. Other
indicators: (a) Circumstances relating to the acquisition, (b)
Special knowledge or experience (likely to want to make use
of expertise to make commercial advantage), (c) Method
and adequacy of financing (acquisitions financed by debt
are likely to be trading- sale to pay off debt in the short
term), (d) Periodic income (if the asset yields little periodic
income, and ought to be known during acquisition- should
have done a feasibility study, it is likely to be trading), (e)
Use (holds more weight than mere intention), (f) Utilisation
of sales proceed (given back as dividends or reinvested in
another capital asset- trading)
Trade and non-trade income (Trade loss and capital
allowance treatment)
- Income in the normal course of ones business versus
passive income
*Check principal activity of taxpayer to differentiate- is it
incidental to carrying on of persons trade?
(a) TBPV (b) Employment (d) Dividends, interest or discounts
(f) Rents, royalties, premiums and any other profits from
property (g) Any gains/ profits of income nature (Not carried
out in ordinary course of business or another business
activity, and there was intention of making a profit- not
voluntary payment)
TAXATION OF COMPANY DISTRIBUTIONS (DIVIDENDS)
No integration: Company is separate legal entity from
shareholders (owners) Income of company and dividends
are separate sources of income so shareholders taxed
independently of company
Full integration: Income of company and dividends are
same source of income so consolidation of taxation of
shareholders and company
(1) Classical two-tier system (no integration)
- Company income taxed twice

(2) Full imputation system

- Company income effectively taxed once (shareholders tax)
- Shareholders obtain imputed credit (tax refund) of the
corporate tax paid

(3) One-tier corporate tax system (shareholder tax

exemption)
- Company income is $1,000, gross dividend of $700 paid to
shareholders
- Company income only taxed once (corporate tax)
EMPLOYMENT INCOME
Comparing employment versus TBPV
(1) Extent of control (2) Extent of investment in capital
assets and engagement of helpers (3) Extent of financial
rewards and risks
Source of employment income (Singapore)
- Income earned in respect of employment exercised in
Singapore
- Where the duties of the employment are discharged or
performed
- Duties performed overseas if it is part and incidental to a
Singapore employment (not separate overseas employmentforeign sourced)
General employment income definition
- Amount paid in respect of employment whether in money
or otherwise
- Must be a reward for duties/services rendered in the course
of the employment, whether in the past, present or future Need not be borne/paid by employer (e.g. tips) - Need not
be contractual (e.g. bonus)
Taxable employment income: Employee had a taxable
personal benefit
(1) Cannot be capital (differentiate and separate)
Inducement payment: Payment received before
commencement of employment, to induce individual to take
up employment
- Capital if compensation for loss of substantial personal
rights/advantages/status (loss of PMA/Giving up a source of
income)
- Taxable if reward for future employment services
(recoverable/conditional on future employment or length of
service)
- Factors to distinguish: (1) How substantial are rights given
up? (2) If sum for remuneration in the future, taxable. If is
additional inducement payment, capital. (3) Whether
payment is payable outright (4) If payment is recoverable
from employee if he does not serve required period, taxable
Restrictive covenant payment: Payment in consideration
of employees undertaking of (1) Not to set up business in
competition with employer (2) Not to take up employment
with a competitor after leaving employment
- Since give up future source of income/PMA, it is capital and

SOURCE OF INCOME (SSI/FSI)

A) Trading income (Issue: Is NR trading in or trading with
Singapore?)
1. Criteria from case law- Contract test: Trade income is
sourced in the state where acceptance of the offer occurs to
create a contract (solicitation of orders and negotiation of
trading terms in any state is insufficient), but if all the
essential elements of the contract are negotiated and
agreed to in the state, the signing of contract is a formality Operations test: Trade income not sourced in state where
the only operations carried out are of preparatory or
auxiliary character
2. ITA S12(1) - The gains or profits of the NR trade/business
deemed to be from Singapore to the extent to which such
gains or profits are not directly attributable to that part of
the operations carried on outside Singapore
- IRAS clarifications: Cannot be purchasing function,
warehousing of goods without trading activities held in
Singapore and a representative office that properly confines
its activities to promotional/liaison (collection) work
*No 6 month threshold (compared to treaty)
3. Concept of Permanent Establishment (PE) - If NR
has enough presence in Singapore to meet or exceed the
minimum level based on PE definition, NR is considered to
have a PE in that state and is trading in that state
- UK-SG treaty:
1. General definition - Any premises, facilities, installation or
space at the disposal of the enterprise, whether owned or
rented or available at the disposal of enterprise or for
exclusive use of the enterprise - Fixed location (certain
degree of permanence) - Activities must be carried on at the
fixed place on a regular basis (need not be of productive
nature) - Can be through employees or machines stationed
at the fixed place of business
2. Specific inclusions - E.g. A place of management, a
branch, an office, a factory, a workshop, a mine, an oil or
gas well, a quarry or any other place of extraction of natural
resources - A building site or construction, assembly or
installation project (lasts > 6 months) - Carrying on of
supervisory activities in connection to project for > 6
months - Furnishing of services, including consultancy
services, through employees or persons engaged by the
enterprise for a period > 6 months - A dependent agent that
has, and habitually exercises, authority to conclude
contracts on behalf of the enterprise
3. Specific exclusions - The use of facilities for storage,
display or delivery of goods - The maintenance of stock
solely for the purpose of processing by another enterprise The maintenance of a fixed place of business solely for the
purpose of purchasing goods or collecting information - The
maintenance of a fixed place of business such that overall
activity is of a preparatory or auxiliary nature (not an
essential and significant part of the whole business) Business activities carried out by independent agent (acting
in the ordinary course of his business: enterprise has smaller
extent of control, agent bears entrepreneurship risk, agent
has a number of principals) - The fact that the company in
contracting state controls/is controlled by NR (subsidiaries)
does not make either company a PE of the other (unless the
subsidiary has the authority and habitually exercises this
authority to conclude trading activities on behalf of holding
company)
B) Dividend income: Determined by resident status of the
company paying the dividend (where control and
management of the company is exercised)
C) Rent income from immovable property: Location of
property
D) Income under ITA S12(6),(7): 12(6a): Interest,
commission, fee or payment in connection with any
loan/indebtedness, or arrangement,
management/guarantee/service relating to indebtedness 12(6b): Income from loans where the funds are brought into
or used in Singapore - 12(7a): Royalty or any other payment
for the right to use any movable property (intellectual
property) - 12(7b): Payment for the right to use scientific,
technical, industrial or commercial knowledge or information
(know-how), or for the rendering of assistance or service in
connection with the application of use of such knowledge or
information (show-how) - 12(7c): Payment for the
management or assistance in the management of any trade,
business or profession (HR management, accounting) 12(7d): Rent or other payments under any agreement or
arrangement for the use of any movable property (e.g.
equipment rental)
- Deemed to be from Singapore if: 1. Payment is borne,
directly or indirectly, by a person resident in Singapore or PE
in Singapore (who the burden of expense falls on, not who
pays it) (take note of exception 1) OR 2. Payment is
deductible against income accruing in or derived from
Singapore (deducted against Singapore payers SSI) OR 3.
For S12(6), the funds provided by the loan are brought into
or used in Singapore
- Exceptions in 12(6A) and (7A): 1. Payment in respect of
any business carried on outside Singapore through a PE
outside Singapore, OR 2. For S12(6), payment in respect of
immovable property outside Singapore
- Exclusions in 12(6A) and (7A), subject to conditions:
1. Commission, fee or other payment relating to any loan or
indebtedness (exclude interest payment), 2. Guarantee fee
relating to any loan or indebtedness, 3. Show-how payment,
4. Management fee payment
- Conditions: 1. Service (not including guarantee) is
performed outside Singapore, and 2. Service provider or
loan guarantor is a NR person
DOUBLE-TAXATION OF FOREIGN-SOURCED INCOME
DTR is applicable if: (A) The income is FSI (Use deemed
sources rules if not obvious) (B) The FSI has been taxed in
the foreign jurisdiction (If not, consider tax sparing relief) (C)
The FSI is received in SG (Remitted/brought into SG, used to
settle a debt incurred in respect of a business carried on in

RESIDENCE OF TAX PAYER

- ITA S(2): Residence for a company is decided by where the
company is controlled and managed.
GENERAL RULE FOR TAXATION OF SSI/FSI AND
EXEMPTIONS (S13)
- SSI taxed on accrual basis while FSI taxed on receipt basis
(a) SSI for individuals
- One-tier dividends from Singapore companies for R and NR
(S13(1))
- Interest income from approved banks or licensed financial
company in Singapore for R and NR (S13)
- Investment income (e.g. distribution from unit trust) (ITA
S13)
- Employment income from short-term employment for NR
(S13(6))
(b) SSI for companies
- One-tier dividends from Singapore companies for R and NR
- Interest income from approved banks for NR companies
(do not have PE in Singapore and does not carry on business
in Singapore)
- S12(6) or (7) payments to promote economic/technological
development (Ministerial approval) (S13(4))
(c) FSI for individuals
- All FSI received for R and NR except through partnership
(S13(7A))
(d) FSI for companies
- Dividends, branch profit and service income for R (ITA
13(8) to (11))*
- FSI for NR that do not carry on business in Singapore (does
not have a source of trade income in SG) (IRAS e-tax guide*need to fulfil condition)
DEDUCTIONS AND ALLOWANCES
1. General deduction formula S14(1): (1) Expenses
incurred in production of taxable income (not nontaxable/tax-exempt), (2) Wholly incurred to produce income,
(3) Exclusively: Business motive to incur expense, (4)
Liability to pay has incurred, (5) Relevant source of income
must exist during that period, (6) Claimant must have
incurred the expense, (7) Wider nexus test looks at purpose
for incurring expense (for conducting business on a
profitable basis) and (8) Deduction is on a source-by-source
basis
2. Prohibition of expense deduction S15: (1)
Domestic/private expense, (2) Sum recoverable under
insurance or indemnity contract (Calculate overall loss), (3)
Singapore tax and FT on FSI, (4) S-plate/E-plate private car
expenses/car rental in Singapore (Commercial vehicles, car
rental outside Singapore, foreign registered car expenses
and public transport expenses qualify), (5) Certain input GST
and output GST, (6) Capital expenditure (with exception)
(Indicators: Initial expense (new/first time), one-off/nonrecurring expense- e.g. annual subscription recurring while
entrance fee one-off), (7) Capital employed in improvement
(vs repairs)
Interest expense: Loan must be used for to produce
taxable income (not non-taxable/tax-exempt) such as
financing capital asset used to acquire taxable income,
Borrowing cost other than interest: Cost is incurred to
substitute interest or reduce interest (e.g guarantee fee,
conversion fee)
Repairs: Revenue expenses (replacement of a subsidiary
part of an asset to restore it to its original working condition)
-Initial repairs (revenue/capital) depends on (1) Condition of
asset purchased (commercially usable condition), (2) Price
paid compared to price payable if in commercially usable
condition, and (3) Generally accepted accounting treatment
Renewals: Capital expenses (replacement of the
whole/substantially whole asset) -Cost of replacement item
is deductible to extent that it does not have improvement
-Should not be a P/M under s19 CA -(Subsidiary part vs
whole asset: Identify functional asset with regard to
taxpayers business)
Bad debts and recovery of bad debts: (1) For trade debt
and not non-trade (e.g. staff loan), (2) Claimants business
not ceased, (3) Previously included as claimants trading
receipt (have a corresponding sales hence transferred trade
debt not deductible), (4) Irrecoverable
Employer contribution: - Approved local fund (CPF)/fund
constituted overseas, - Employees engaged in production of
the employers income, - Obligatory contributions
(employment contract/constitution of fund) - Excess CPF
contribution/voluntary contribution not deductible
Payment to related employees (Remuneration paid to
employees related to employer): - Reasonableness test
(commercial justification) - Excessive payment is not
deductible - Covers payments made by way of
compensation for injuries or death etc
Medical expense restriction: Deduction of medical
expense restricted to 1% (or 2%) of total employee
remuneration in the basis period
Allowance paid to employee: Contractual, hence
employee not required to account for expenditure (less
restrictions compared to remuneration)
Exchange differences: Deductible if the underlying
transaction is revenue in nature (No need to consider
whether realised or unrealised)
3. Further deduction S14B/14R
S14B Trade fairs - Expenses relating to approved trade
fairs/exhibitions or trade missions or to maintain overseas
trade office (Includes employee air-fare and
accommodation) - Qualify for 200% deduction (100% further
deduction) if amount does not exceed $100,000
S14R Training expense - Qualifying training expenditure In-house training programmes must be accredited (nonaccredited exp cap $10,000/YA) - External training (no
restriction) - Qualifying expenses include salary/fees of
trainers, rental of premises, materials, refreshment - PIC
scheme (13-15) has 100% base and 300% enhanced
deduction ($1.2 million cap for 3 years) - PIC+ for qualifying
SMEs has $1.4 million cap ($600K/yr from 15)

not taxable
Compensation for loss of the office: To compensate for
premature termination of expectation of continued
employment in foreseeable future
- Not taxable: Compensation for loss of source of income
(e.g. Retrenchment benefit) - Taxable: Reward for past
employment services
Salary in lieu of notice of termination: Direct
substitution for salary that would have been earned by the
employee if proper notice had been given by the employer
(e.g did not give 3 month required notice) - Taxable
(2) Allowances or reimbursements
Allowance: Generally taxable - Exception: For subsistence,
travelling, conveyance or entertainment - Conditions: Must
be expended for business and the expense (to company)
must not have been prohibited under S15
Reimbursement: Based on actual expenses incurred by
employee
- Business expense (no personal benefit) is not taxable Personal expense is taxable (e.g. housing reimbursement)
*S15 prohibitions are irrelevant
(3) Taxable benefits-in-kind/perquisites (BIK)
Interest-free/subsidised loan - Situation 1: Employer
takes loan at provides loan to the employee at interestfree/subsidised rate - If employee has (1) no control and (2)
does not hold substantial shareholdings, and (3) the scheme
is open to all staff on the same terms,
the interest benefit is not taxable - Situation 2: Employee
obtains loan from bank and employer pays interest for
employee, OR reimburses whole/part of the interest Employee taxed on the interest subsidy
Employee life insurance premium: Depends on who the
beneficiary of the insurance is (who insurance payout goes
to) E.g. Keyman insurance
Club membership fees: 1. Corporate membership:
Entrance fee not taxable, subscription fee taxable on portion
attributable to private usage
2. Individual membership: Entrance fee taxable, subscription
fee taxable on portion that attributable to private usage
Employers CPF contribution: Excess of statutory
contribution is taxable
Home leave passage: Concession: 20% of cost taxable for
1 return trip per adult (employee and spouse) per year, and
2 return trips per unmarried children per year (excess is
100% taxable)
- Concession applies to: Employees who are not Singapore
citizen or PR, and trips made to employees home country
*Relocation passage is not home leave passage (not a
reward/benefit)
Housing and housing benefits: 1. Residence or serviced
apartment
- Taxable amount is annual value less total rent paid by
employee (if any)
- If AV not available, market rent paid by employer (including
rent for furniture and fittings), less total rent paid by
employee
2. Furniture and fittings (in residence or serviced apartment)
- Fully furnished: Taxable amount of furnishing is 50% of AV
of property
- Partially furnished (only fittings such as fans): Taxable
amount is 40%
*In addition to taxable amount of fully furnished residence
3. Utilities and housekeeping costs: Taxable amount is actual
amount paid
4. Hotel accommodation: Taxable amount is actual cost
incurred by employer less amount paid by employee 5.
Housing allowance: Full amount of allowance is taxable (not
covered by exception)
Car benefits: 1. Provision for use of car *Car cost
includes COE cost

- Employee paid petrol, TA =

3
7

Car costresidual value

10

+ 0.45/km x

private km

- Employer paid petrol, TA =

3
7

Car costresidual value

10

+ 0.55/km x

private km
2. Repayment/reimbursement for expenses relating to
employees own car

- Taxable amount =

Private km
Total km

x expenses

reimbursed by employer
- Private purposes: Mileage claims for travel between home
and office during office hours, mileage claims to see a
doctor, car park charges for parking car in carpark while
employee is working - Biz purposes: Mileage claims for

SG, or used to purchase movable property which is then

brought into SG
Exemption method: Given in country of source of income
or residence
(1) S13(7A) exemption for individuals (R/NR): All FSI
received
(2) S13(8) to (11) exemption for DBS
(1) Foreign dividends paid by NR company, (2) Profits of
overseas branch of Singapore resident company (not
including non-trade income), (3) Foreign professional,
consultancy and other service income (income derived from
outside Singapore through a fixed place of operations in a
foreign country)
- Conditions: (1) Received in SG by SG resident (2) FT
suffered where FSI was immediately received (may not be
source country- e.g. pass through Malaysia) (3) Headline tax
rate in the foreign jurisdiction is > 15% in that year FSI was
received in SG (not earned) (not actual tax suffered) (4) CIT
is satisfied that exemption is beneficial to Singapore
resident
Credit method: Relief given in country of residence
- Tax FSI at gross amount (before FT) and give tax credit for
FT suffered
(A) Tax treaty relief/Unilateral tax credit relief
- All types of FSI (not limited to DBS like exemption)
- If treaty and domestic tax laws conflict, treaty provisions
prevail to the extent that it provides for a more favourable
tax treatment
- Tax treaty cannot impose tax that is not levied under
domestic tax laws
- ITA Section 50 credit code: Conditions: (1) Claimant is a
SG resident and (2) Claim made not later than 2 years after
the end of the relevant YA
- Tax credit is computed on source-by-source basis for each
FSI receipt, and is restricted to the lower of actual FT
suffered and ST payable
- ST payable=SG effective tax rate (SETR) x FSI (net of
deductible expenses)
- ST payable =

FSI net of deductible expenses

Statutory income( both FSI SSI )
x Tax paid @ 17%
- No carry-forward/carry-back of foreign tax credit
(B) Foreign tax credit (FTC) pooling (From YA2012,
election basis)
Conditions: (1) Must be subject to foreign tax, (2) Headline
tax rate in source country must be > 15% when income is
received in Singapore, (3) Must be subject to income tax in
Singapore (not exempt, but can forgo exemption), (4) Must
be eligible for FTC
- Pooled foreign tax credit is restricted to lower of aggregate
of actual FT suffered on all the elected income in the source
countries and the aggregate of ST payable for that YA on all
the elected income
(C) Issue regarding foreign dividends for credit
method
- Foreign dividend received in Singapore may be subject to
one or two levels of foreign tax (DWT and/or UT)
- Approach: Check if foreign dividend has been subject to
DWT and/or UT
(1) Tax treaty: Generally provides DTR for DWT, may provide
for UT (subject to conditions)
(2) UTCR: Provides DTR for DWT and will provide DTR for UT
on condition that the Singapore resident co-owns at least
25% shareholding in the foreign company paying the
dividend
- Only covers DWT: Include gross dividend in SI and tax
credit for DWT only
- Covers both: Regross dividend to include UT, include
regrossed dividend in SI and claim tax credit for both DWT
and UT
- No DWT and does not cover UT: No tax credit
*Foreign branch profit may be subject to UT and/or
withholding tax. If subject to both UT and WHT, gross up and
claim tax credit on both UT and WHT (no conditions like for
dividends)
Deduction method: FSI is taxed at the net amount (after
FT) instead of gross amount - Not statutory allowed (since
foreign tax expense is originally not deductible under S15)
but may be given as a concession where credit method
cannot be used - E.g. When tax payer is not in a tax paying
situation, such an election will not be beneficial as no tax
liability to set off the foreign tax credit (instead, tax at net
amount to result in higher amount of unabsorbed items for
c/f and c/b)
Tax sparing relief: May be provided under a tax treaty Allowed by the country of residence (the tax deemed
suffered in country of source when originally no FT sufferedno double taxation)
- Claim on source-by-source basis
- Equal to the lower of ST payable and FT spared/deemed
suffered
Tackling DTR questions
(1) Is that particular FSI received in Singapore?
(2) What type of DTR does the FSI qualify for?
- If does not qualify, consider tax sparing relief
(3) If qualify for more than one type, which one gives the
better outcome?
- Compute and compare final tax liabilities (if applicable)
(4) Finish up tax computations and conclude
ORDER

4. Special deduction S14Q (Renovation or

refurbishment) - For qualifying expenditure in connection
with renovation or refurbishment of business premises for
carry on of trade - Not for P/M - Qualifying: General lighting,
general electric installations, fixed partitions, false ceilings,
cornices, floorings, wall coverings, doors, gates, windows,
window grilles, kitchen fitting, sanitary fittings - Nonqualifying: Designer fees, professional fees, antiques, works
of fine art, expenses relation to structural changes where
approval is required - From YA2013, $300,000 cap per 3
years. Before YA2013, $150,000 cap - Deducted over 3
consecutive years (divide by 3) and cannot be deferred Comparing renewal and S14Q, S14Q has a new asset while
S14(1c) is replacement
5. Capital Allowances
S19/19A Wear and Tear Allowances for P&M Qualifying CE: Installation, delivery, exchange loss,
incidental cost relating to installation, P&M for use in a trade
- Plant test: (1) PMA test: Asset retained in persons trade
as means of producing income, (2) Business Apparatus test:
In nature of apparatus to carry on persons trade (not just be
part of the premises that houses the trade)- check
commercial necessity of asset to decide if plant/premises,
(3) Premises test: Asset must not be in nature of a building
or part of a building (inextricably/undistinguishably
connected to building)
(A) Normal allowance: 20% IA (Incurred basis, cannot be
deferred), AA claim over tax life (In-use basis, can be
deferred), (B) Accelerated Allowance (3 year): No IA, AA (1/3
of CE incurred in BP, claim can be deferred), (C) Accelerated
Allowance (low value assets): 100% claim, subject to cost of
each asset ($5,000) and total in one YA ($30,000) Claim
excess under (A) or (B), (D) Accelerated Allowance
(prescribed assets): For computers and prescribed
automated equipment, 100% claim on incurred basis,
qualifies for PIC (300% enhanced allowance)
*No enhanced allowance if PIC automated equipment is
purchased for the purpose of being leased out/disposed of
within one year *TWDV: Tax written down value = Cost CA
claimed previously
S19B Writing Down Allowances for IPR - CE incurred by
company on IPR for purposes of trade, business or
profession - Claimed over 5 years on a SL basis (x20% per
YA) - Acquisition of IPR qualify for 300% enhanced WDA
under PIC ($1.2m x 300% x 20% per YA)
Industrial Building Allowances (IBA) - In use for a
qualifying trade (manufacturing) only - IA (25% on incurred
basis), AA (3% in-use basis) - Has balancing adjustment Only for CE incurred before 23/2/2010
Land Intensive Allowances (LIA) - CE on
construction/renovation of a building/structure - The
building/structure is/will be on industrial land or airport of
port land - The use of the building/structure promotes the
intensified use of land - Prescribed industries:
Pharmaceuticals, petrochemicals, petroleum, specialties,
other chemicals, semiconductor-water fabrication,
aerospace, marine and off-shore engineering, solar cell
manufacturing and logistics - Qualifying expenditure: Costs
of feasibility study, design fees, planning approval costs,
piling, construction and renovation costs, demolition costs of
existing non-industrial building/structure, legal/professional
fees, stamp duty (does not include interest (already in S14)
and land cost) - Only for CE incurred on/after 23/2/2010
(planning/conservation permission applied on/after that
date) and requires application and approval by EDB - IA
(25% on incurred basis), AA (5% in-use basis) - No balancing
adjustment for LIA
Balancing Adjustments - P&M ceases to belong to trader,
ceases to be permanently use for trade, or trade is
permanently discontinued
- Sale proceed (SP) TWDV
- If < 0, balancing allowance (BA) is deductible in hands of
seller
- If > 0, balancing charge (BC) is taxable in hands of buyer
(But cannot be more than total CA previously allowed) - For
the buyer, sales proceed is cost and can claim CA
*Dont
claim CA in year of disposal
Transfers between parties - S24 election: Buyer and
seller must be related parties, asset must be used in
production of taxable income before and after transfer,
asset must not previously be leased by seller to buyer and
the transfer should not be tax-motivated - Purpose: Mitigate
(or postpone) taxes for the Group as a whole Results in
more allowance for buyer and no BA/BC for seller - S24 will
not apply to transfer of industrial building on/after 23/2/2010
- Seller deemed to have sold asset based on TWDV, hence
no BA/BC - Buyer deemed to have purchased asset based on
TWDV and continues to claim CA based on TWDV and
remaining useful life S24 beneficial when buyer is in loss
position (need allowance), seller selling above TWDV (avoid
BC) and is in profitable position
6. Approved donations - Approved donations: Donation of
money (cash only) to the govt or approved institution of a
public character in SG - 250% tax deduction - Company: PAY
basis - Individual: PAY basis (donation out of business
assets) or PCY basis (donation out of personal assets)
7. Trade losses - Trade losses occur when gross taxable
trade receipts is greater than the tax deductible trade
expenses (adjusted trade loss)
UNABSORBED LOSS ITEMS

- Unabsorbed CA, trade losses and approved donations

travel between home and office when working beyond

official working hours, mileage claims for travel between
office and clients office including carpark charges for
parking at clients office
Employee share/stock options
1. Shares with no restriction on sale
- TA = Open market price/last done or closing price price
employee paid
- Accrues to employee on date of exercise of rights
2. Shares with restriction on sale of shares
- Accrues to employee on date restriction ceases to apply
*When employee ends employment before exercising,
deemed to have obtained the gains when employment
ceased
Medical and dental benefits: Not taxable on condition
that benefits are made available to all staffs (Extended to
employees spouse and children)
Childcare/education - Tax exempt: Childcare benefit is
structured as a payment of childcare allowance, subsidy or
reimbursement to employee OR employer runs licensed
childcare centre and provides childcare facilities
- Allowance: Only amount expended by employee will be
exempt
(4) Bonus: Always taxable (revenue) (1) Contractual
bonus: Employee is entitled in year specified in the contract
(the year the service is rendered) and may be subject to
conditions (e.g. cannot resign in a certain year)
(2) Non-contractual bonus: Employee entitled when the
bonus is paid
(5) Directors fee: Always taxable (revenue) (1)
Approved in arrear: Entitled when the fee is approved (2)
Approved in advance: When the service is rendered (if
resign before service, not entitled)
Determine residency of employee
(A) Qualitative test: Considered to be resident if normally
residing in Singapore in preceding year (If absent, consider if
temporary, reasonable, period, purpose of absence and
intention to return)
(B) Quantitative test: Physical presence: Physically
present in SG for > 183 days in preceding year Employment: Exercise employment in SG for >183 days in
preceding year
*Does not apply to non-executive
directors
(C) 2-year concession: Exercises employment/physically
present in SG for continuous period of 183 days, straddling
across 2 consecutive calendar years - Considered to be
resident for both YAs
(D) 3-year concession: Exercises employment/physically
present in SG for continuous period, straddling across at
least 3 consecutive years (can be more than 3 years) Considered to be resident for all relevant YAs
Taxation for residents (if taxed as resident) (A)
Personal reliefs: Deducted against AI to arrive at CI,
unabsorbed personal reliefs cannot be carried forward E.g. Earned income relief, handicapped spouse relief
(B) Tax rebates: Set off against tax liability and
unabsorbed rebates can be carried forward - E.g. Personal
income tax rebate, parenthood rebates
(C) Tax rates for resident (Progressive tax rate) - For CI
$20,000 or less, there is no tax liability and highest marginal
tax rate is 20%
Taxation for non-residents (if taxed as non-resident)
- Flat rate of 20% for both employment income and other
income received
- Except for tax exempt income/royalty/interest (reduced
rates)
- Given non-resident employee reliefs for their employment
income
(A) S13(6) relief: Tax-exempt subject to conditions: (1) NR
exercises employment in SG for < 60 days in preceding year
(2) Employment is ST and does not straddle across 3
consecutive calendar years - Exclusions: NR non-executive
directors, public entertainers and professionals (lawyers)
(B) S40B relief: Taxable but claim relief - Condition: NR
exercises employment in Singapore for > 60 days but < 183
days in preceding year
- Taxed at higher of: (1) Non-resident basis of flat rate of
15% (2) Resident basis (progressive tax with personal
reliefs)

Net profit/loss before tax per P/L a/c

- Add: Non-deductible expenses in P/L, Taxable income not in
P/L, Expenses incurred on non-trade income
- Less: Non-trade income in P/L, Non-taxable/tax exempt
income in P/L, Revenue expense capitalized (not in P/L)
- Less: Special S14Q/Further S14B, S14R deductions
Adjusted trade profit/loss
- Less: Capital allowances (FIFO)
- Less/add: BA/BC
- Add: Non-trade income
Statutory income
- Less: Trade losses (FIFO)
- Less: Approved donations (FIFO)
Assessable income
- Less: GR (items transferred in)
- Less: Carry back relief
Chargeable income before exemption
- Less: Partial exemption
Chargeable income after exemption
Tax on CI @ 17%
- Less: Foreign tax credit
- Less: Corporate income tax rebate (30%)
Net tax payable

1. Carry-forward (default): CA subject to biz continuity test

and shareholdings test while TL/AD subject to shareholdings
test (C/B too)
*CF of unabsorbed CA vs Deferred CA claim: - Unabsorbed
CA carry the risk of being permanently disregarded in the
event of failure of the shareholdings test (no risk for
deferred CA claim)
2. Carry-back (elected): Only current year loss items for CA
and TL
- Amount carried back lowest of: (1) Current year
unabsorbed loss, (2) AI of preceding year, and (3) Cap of
$100,000
- Tax discharged in previous YA = New tax tax previously
assessed
(A) Business continuity test: Continues to carry on the
trade in respect of the profits the allowance falls to be made
(look at YA, not relevant dates)
(B) Shareholdings test - The ultimate shareholders and
their shareholdings must be substantially (50% of more) the
same as at the two relevant dates (i.e. the shareholdings
(direct/indirect) of the shareholders that appear at both of
the relevant comparison dates must be 50% or more)
- If less than 50%, there is substantial change in the
shareholdings composition *Does not matter if indirect
shares are held by FIC/individual
- Relevant comparison dates for CA: 31 December of YA the
allowances arose and 1 January of the YA the allowances are
to be utilised (e.g. 1 Jan 2015 if utilised in YA2015)
- Relevant comparison dates for TL/AD: 31 December of the
calendar year the loss was incurred/donation was made and
1 January of the YA in which the loss or donation is to be
utilised
- Purpose: Prevent profitable companies from buying over
loss companies to take advantage of the latters
unabsorbed loss items
- Waiver: If successful, affected unabsorbed loss items can
only be set off against income from the same trade. CIT has
to be satisfied that the change in ultimate shareholders is
not tax motivated (consider nationalisation, privatisation,
listing in stock exchange and commercial reasons for the
large change)
3. Group relief (elected): (a) Transferor company and
claimant must be Singapore-incorporated, (b) Members of
the same group on the last day of the basis period (Ordinary
shareholding test), (c) Have the same accounting year end,
(d) Election must be made by both parties
- Only current year (cannot be brought-forward losses)
- Amount to be transferred is the lower of the AI of the
claimant and the qualifying deduction of the transferor
- Can have more than one claimant and/or transferor- settle
one transferor fully before the other
Ordinary shareholding test: (a) At least 75% of issued
ordinary shares in one company are held, directly or
indirectly, by the other OR (b) At least 75% of in each of the
2 companies are hel, by a third SIC (holding company)
*Always try both. May not meet (a) but may meet (b)
- Only ordinary shares (not treasury share/share that carries
the right only to fixed dividend) Cannot be FIC or individual
- Check on last day of BP
Choosing between GR/Carry-forward/Carry-back
1. Calculate amount to be brought forward from prior YAs
2. Optional: Any transfer election which will change CA for
the companies
3. Satisfaction of GR criteria?
4. Determine which companies are potential transferors and
claimants
5. Satisfaction of c/b criteria? (Will thus satisfy c/f too)
6. Decide on amount to be transferred under GR and carried
back (to maximise partial exemption of $300,000 before CI)
7. Determine amount to be carried forward to future YAs.